SA’s retirement crisis takes toll on business

There is a growing awareness that South Africa is in the midst of an escalating retirement savings crisis. As the effects of this on families, charitable organisations, wider civil society and government start to become clear, we should not underestimate the more immediate toll that a highly stressed, perhaps even panicked, workforce is having on business.

One of the country’s largest retirement fund providers has just reported that only 5.17% of those who had retired this year from funds it administers were able to maintain their standard of living. This statistic resonates with the National Treasury statement that only 6% of South Africans were on track for a decent retirement.

This 6% figure from Treasury was also recently corroborated by a new report by 10X Investments, which was based on data from a nationwide survey that sampled the universe of 11.9 million economically active South Africans. The inaugural annual 10X Investments South African Retirement Reality Report, which was released in September, found that only 7% of people were executing a retirement plan that had been well thought-through.

This national retirement savings disaster will affect all spheres of life, particularly by increasing pressure on families who must support the older generation as they struggle with the costs of raising their own families. The burden on the state, and ultimately the taxpayer, will also increase in the near future due to increased pressure on social and healthcare services and much more. Companies are no doubt already feeling the negative effect of the looming crisis, with consequences including:

Employees who are distracted by financial worries are less productive and more prone to making mistakes and having accidents.

Employers risk losing their most talented employees to other employers who offer better retirement benefits.

Workers might be forced to take on additional work/second jobs to improve their financial situation.

PricewaterhouseCoopers’ 2018 Employee Financial Wellness Survey, which tracks the financial and retirement well-being of working adults in the United States, found that close to half of all employees feel stressed about their finances. When asked what causes them the most stress in their lives, nearly twice as many say financial matters as compared with job stress. In fact, more employees say financial stress than health concerns and relationships combined.

With increased longevity in the U.S. and South Africa, these challenges are likely to continue to increase. Many South African companies are already taking action to mitigate the effect of the crisis, in particular by starting corporate retirement savings funds and selecting the manager carefully, or by scrutinising and potentially reconsidering the fund manager they are with if they are no longer providing them with the best option.

In its 10 years in existence 10X Investments has disrupted the retirement saving environment with a stated mission of “helping more people retire with dignity”. The bulk of the established industry offer a large and expensive array of retirement savings products, which are difficult to understand and increasingly being shown to have undershot expectations. Just on a cost comparison basis, a cost saving of one percent in fees on a corporate umbrella pension or provident fund can add up over the course of a savings lifetime to add 30% to the retirement savers’ pension income.

10X Investments offers businesses a free, no obligation benchmark comparison of what they are paying with their current provider versus what they would pay with 10X. To receive a call to discuss a comparison for your business provide your details here https://www.10x.co.za/institutional

10X Investments offers one simple, low-cost product to all retirement savers both on an individual basis and at a corporate level. This means that everyone gets access to 10X’s best investment view, which gives them the best possible chance of retiring with dignity; testament to this is the fact that more than 30% of corporate members are currently on track to meet their retirement goals.

Contrary to popular belief, making a retirement plan is not as complicated as it might seem. In fact, it takes less than 10 minutes to create a personalised retirement plan using 10X Investments’ online retirement planner. Anyone who can access the internet on a computer or a cell phone can input their personal details, such as how much they earn, how old they are and how much of their salary they are saving for retirement, to one of the 10X retirement calculators and a plan will be created for them immediately.

If they are not happy with their outcomes, which are presented in a variety of simple user friendly formats – from a giraffe whose neck grows the closer he gets to reaching his goal of eating green shoots at the top of trees to a simple graph – they can adjust the inputs, such as retirement age or percentage of salary saved, to change the outcomes.

Only once individuals have a defined target can they start to take the required steps in order to meet their goal and to better align their present and future realities. As members of a 10X pension or provident fund, not only will employees get a retirement plan, they will receive regular updates and tips via email and sms to ensure they stay on track to meet their goals. Also, 10X Employee Benefit Consultants provide in-house financial wellness training to all corporate clients and their employees.

Providing employees access to a simple, low cost (and high performing) retirement fund will do more for employers than to just help them and their staff to retire with dignity. It has been shown that staff feel a lot more connected to a company that cares enough about them to help them get the best possible chance of retirement success; this inspires greater loyalty; ultimately feeding into greater productivity and company alignment.

The benefit to a company of reducing the burden of employees constantly worrying about the future cannot really be immediately measured, but it can certainly be felt.

10X calculator assumptions & disclaimers

Fees are the only difference between the “Industry” and 10X projections.

The fees used in the projections are inclusive of VAT. The investment referred to as “Industry” is assumed to charge total fees of 3% including VAT per annum. Morningstar’s Global Fund Investor Experience 2015 study shows that the average total expense ratio is 1.63% pa (which includes investment and performance fees), with the cost of advice and an administration platform adding an additional 1% to 1.5% pa. The investment with 10X assumes a total fee of 1% including VAT per annum and that the client comes directly to 10X (i.e. no advisor fee). This is the maximum investment fee charged by 10X.

The calculator assumes the you save 10% of the salary you input and that this grows annually in line with inflation.

The investment term and savings period is assumed to be from your current age to age 65, unless you are over 55. If you are over 55 the investment term is assumed to be 20 years.

Your projected investment value is shown in real terms (today's money). This means we have shown what future values would be worth today, once we have stripped out inflation.

The projected average and poor investment returns are based on historic market returns after inflation from 1900 to 2017. Historically over your savings period, one in four outcomes have been worse than the outcome shown under poor returns and three in four have been better. The projections therefore account for historical market fluctuations.

The projections are based on the 10X High Equity portfolio, which is designed for investors with an investment term of 5 years and longer. The portfolio may be highly volatile over shorter periods.

The projections do not account for tax in any way.

The projections shown are based on information provided by you regarding your financial situation. 10X Investments does not in any way guarantee the projected benefits shown; we offer these projections merely to assist you in your financial planning. Although our projections take account of the historical returns earned in the South African and International markets, future market returns are uncertain. Past performance does not guarantee nor indicate future results.

The calculations provided should not be construed as financial, legal or tax advice. In addition, such information should not be relied upon as the only source of information. This information is supplied from sources we believe to be reliable but we cannot guarantee its accuracy.

10X Investments is a licensed Financial Services Provider #28250 and S13B Funds Administrator #24/444. The information on our website does not constitute advice as defined by the FAIS Act.

10X calculator assumptions & disclaimers

Fees are the only difference between the “Industry” and 10X projections.

The fees used in the projections are inclusive of VAT. The investment referred to as “Industry” is assumed to charge total fees of 3% including VAT per annum. Morningstar’s Global Fund Investor Experience 2015 study shows that the average total expense ratio is 1.63% pa (which includes investment and performance fees), with the cost of advice and an administration platform adding an additional 1% to 1.5% pa. The investment with 10X is assumed to charge a fee according to the 10X Living Annuity scale. The maximum fee in this scale is 0.86% including VAT per annum.

Your projected income and investment value are shown in real terms (today's money). This means we have shown what future values would be worth today, once we have stripped out inflation.

The projected income in the first year will be equal to your desired income provided your annual income is between the regulatory limits of 2.5% and 17.5% of your investment value. Each year your projected income will keep pace with inflation, provided that it falls within these regulatory limits. The number of years that your projected income is able to keep pace with inflation without exceeding the regulatory cap of 17.5% is displayed on the outputs.

The projected average and poor investment returns are based on historic market returns after inflation from 1900 to 2017. These returns are based on the portfolio you selected (defaulted to 10X High Equity if your term exceeds 5 year). Historically over your savings period, one in four outcomes have been worse than the outcome shown under poor returns and three in four have been better. The projections therefore account for historical market fluctuations.

The projections shown are based on information provided by you regarding your financial situation. 10X Investments does not in any way guarantee the projected benefits shown; we offer these projections merely to assist you in your financial planning. Although our projections take account of the historical returns earned in the South African and International markets, future market returns are uncertain. Past performance does not guarantee nor indicate future results.

The calculations provided should not be construed as financial, legal or tax advice. In addition, such information should not be relied upon as the only source of information. This information is supplied from sources we believe to be reliable but we cannot guarantee its accuracy.

Note that the 10X Living Annuity is underwritten by Guardrisk Life Limited (FSP No. 76).

10X Investments is a licensed Financial Services Provider #28250 and S13B Funds Administrator #24/444. The information on our website does not constitute advice as defined by the FAIS Act. The 10X Living Annuity is underwritten by Guardrisk Life Limited (FSP No.76).

10X calculator assumptions & disclaimers

Fees are the only difference between the “Industry” and 10X projections.

The fees used in the projections are inclusive of VAT. The investment referred to as “Industry” is assumed to charge total fees of 3% including VAT per annum. Morningstar’s Global Fund Investor Experience 2015 study shows that the average total expense ratio is 1.63% pa (which includes investment and performance fees), with the cost of advice and an administration platform adding an additional 1% to 1.5% pa. The investment with 10X is assumed to charge a fee according to the 10X Investment fee scale and that the client comes directly to 10X (i.e. no advisor fee). The maximum fee charged by 10X in these scales is 1.04% including VAT per annum.

Your projected benefits are shown in real terms (today's money). This means we have shown what future values would be worth today, once we have stripped out inflation.

The projected benefits are shown at age 65, unless you have changed the retirement age on the output page.

Where applicable, the projected monthly income assumes that you purchase an inflation-linked guaranteed annuity at retirement with your projected investment value. This estimate assumes that you use your entire projected investment value to purchase an annuity at retirement. Our estimate is based on the recent price of an inflation-linked guaranteed annuity without a spouse. An inflation-linked guaranteed annuity will provide you with an income that grows annually with inflation and pays you an income for the remainder of your life.

The projected average and poor investment returns are based on historic market returns after inflation from 1900 to 2017. Historically over your savings period, one in four outcomes have been worse than the outcome shown under poor returns and three in four have been better. The projections therefore account for historical market fluctuations.

The projections above are based on the default investment strategy called the 10X default glide path, unless you changed the investment portfolio on the output page . The 10X default glide path automatically matches the investment portfolio’s asset allocation to your assumed retirement age. This ensures that when you are more than five years from retirement that you mainly own assets that are expected to deliver high returns - with expected higher volatility of returns - and that the portfolio will gradually be switched into less volatile assets - with expected lower returns - in the last five years before you retire, with the aim of preserving capital.

The projections shown are based on information provided by you regarding your financial situation. 10X Investments does not in any way guarantee the projected benefits shown; we offer these projections merely to assist you in your financial planning. Although our projections take account of the historical returns earned in the South African and International markets, future market returns are uncertain. Past performance does not guarantee nor indicate future results.

The calculations provided should not be construed as financial, legal or tax advice. In addition, such information should not be relied upon as the only source of information. This information is supplied from sources we believe to be reliable but we cannot guarantee its accuracy.

10X Investments is a licensed Financial Services Provider #28250 and S13B Funds Administrator #24/444. The information on our website does not constitute advice as defined by the FAIS Act.

10X calculator assumptions & disclaimers

Fees are the only difference between the “Industry” and 10X projections.

The fees used in the projections are inclusive of VAT. The investment referred to as “Industry” is assumed to charge total fees of 3% including VAT per annum. Morningstar’s Global Fund Investor Experience 2015 study shows that the average total expense ratio is 1.63% pa (which includes investment and performance fees), with the cost of advice and an administration platform adding an additional 1% to 1.5% pa. The investment with 10X assumes a total fee of 0.57% including VAT per annum and that the client comes directly to 10X (i.e. no advisor fee).

Your projected benefits are shown in real terms (today's money). This means we have shown what future values would be worth today, once we have stripped out inflation.

The projected average and poor investment returns are based on historic market returns after inflation from 1900 to 2017. Historically over your savings period, one in four outcomes have been worse than the outcome shown under poor returns and three in four have been better. The projections therefore account for historical market fluctuations.

Your projected monthly income (if applicable), grows in line with inflation until your money is depleted.

The projections are based on the 10X High Equity portfolio, which is designed for investors with an investment term of 5 years and longer. The portfolio may be highly volatile over shorter periods.

The projections do not account for tax in any way.

The projections shown are based on information provided by you regarding your financial situation. 10X Investments does not in any way guarantee the projected benefits shown; we offer these projections merely to assist you in your financial planning. Although our projections take account of the historical returns earned in the South African and International markets, future market returns are uncertain. Past performance does not guarantee nor indicate future results.

The calculations provided should not be construed as financial, legal or tax advice. In addition, such information should not be relied upon as the only source of information. This information is supplied from sources we believe to be reliable but we cannot guarantee its accuracy.

10X Investments is a licensed Financial Services Provider #28250 and S13B Funds Administrator #24/444. The information on our website does not constitute advice as defined by the FAIS Act.